Whale Watching - Playing Politics with Auto Manufacturers
Unpredictable Era for Auto Industry
Editor’s Note: We at Truck Trend have a policy of staying out of politics, even during election years. However, we also believe in not censoring our contributors’ editorial columns. As such, the views expressed herein are wholly those of Mr. Whale and not representative of Truck Trend as a whole. The column has been edited for clarity and accuracy. Enjoy!
I’ve long championed that government should not be in the truck-building business. By extrapolation, if the government gets involved, the resulting vehicles would be highly inefficient, prone to dysfunction, bloated, and any shade you want so long as it’s gray, khaki, white or olive drab. As of writing this between the presidential election and inauguration, no one knows what’s coming next, but the president-elect has already stuck his nose into manufacturing—automotive and other—where some would rather leave business to business.
It began with Ford mentioning it might move Lincoln MKC production to a Mexico factory—with no loss of U.S. jobs—to make room for new products, an idea first floated in 2015 to happen in 2019. During the campaign, this announcement got spun along the lines of closing an assembly plant in the U.S. Ford never said anything about closing any plants—the UAW probably wouldn’t let them under the current contract—only moving MKC to make room for more Escape production, a vehicle that’s ultimately more valuable for the company.
The candidate noted, “I worked hard with Bill Ford to keep the Lincoln [sic] plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me.” (Trump won Kentucky but lost the county that’s home to both of Ford’s plants.) The candidate also chided Ford in 2015 for moving jobs from the U.S. to Mexico, even though medium-duty truck production went from Mexico to Ohio a year earlier, and you don’t just change manufacturing locations in a month or two—it takes years. Yes, Ford has facilities in Mexico—they have for more than 90 years—but it seems they’ve invested far more in the U.S. in the last five years (a stated $12 billion and 28,000 jobs) than in Mexico.
Post-election, it was the Carrier furnace manufacturing plant in Indiana, home of the VP-elect, which drew the ire of the incoming administration. Carrier had previously announced 1,000 jobs to be cut there and moving the production to Mexico, a long-term view that would reduce costs and purchase prices, meaning a promising forecast rather than shrinking sales. But at least as far as manufacturing goes, the president-elect doesn’t think long-term.
The president-elect used the same tariff threat against Carrier that he did with Ford, and a 35 percent tax for a company that sells a third of the furnaces in the U.S. would have an impact. Less known, Carrier is part of United Technologies, which generates significant income from the Pentagon and would see a big drop in its $2 billion tax bill if promised tax revisions come through. If you’re the boss at United Technologies, you don’t want to get in a pissing match with the incoming commander-in-chief or lose a big tax break, but you’ll probably think twice about opening any new plant (for anything) here.
I have friends in manufacturing in Indiana and I get it. The 0.015 percent of the state that kept their Carrier jobs are obviously relieved, but this short-term, kick-the-can-down-the-road-mentality strikes me as too much like buying truck you can’t afford and spreading the payments out over six or seven years.
Ford may benefit from the new administration with relaxed requirements, despite the EPA moving up a deadline four months to make changing fuel economy targets harder. For Ford, health care expenses might drop if Obamacare’s repealed or replaced, and the Trans-Pacific Partnership, which would lower the 25-percent tariff on Japanese trucks, is in jeopardy. On the other hand, how much pain would the suggested 35 percent tariff on anything produced in Mexico hurt? Maybe enough to cost a lot of U.S. jobs?
So far the president-elect’s nominations look favorable to Detroit: Oklahoma Attorney General Scott Pruitt for EPA, ExxonMobil CEO Rex Tillerson as Secretary of State, and Texas former governor Rick Perry for Energy. Mr. Pruitt is suing the EPA on two issues and his LinkedIn page references “EPA’s activist agenda,” Tillerson’s buddies with Putin and Exxon would love to see Russian sanctions lifted, and Perry gained notoriety wishing to dismantle three government agencies and couldn’t name Energy as the third one during a debate. But regardless of the uncertainty surrounding this trio, they each sound sympathetic to the plight of Detroit.